Tag Brazil Finance Minister

The Brazilian government announced on Thursday measures to boost production and recover the country’s growth, including a credit injection of R$83 billion (US$20.4 billion) into the economy. Among the measures announced are investments in infrastructure and more available credit from state-run banks to small and medium sized companies and for important economic sectors such as agriculture and construction.

According to Finance Minister, Nelson Barbosa, the measures will not incur extra costs for the government. “The greater part of the initiatives is administrative. There will be no additional cost for Brazilian taxpayers. We want to make better use of the available resources,” said Barbosa during a press conference to announce the measures.

In addition to freeing up credit for industry and agriculture, the government will also ask Congress to approve a measure that would allow laid off workers to use their FGTS (workers’ pension fund) as a guarantee to obtain loans. According to Brazil’s Central Bank the total volume of credit offered by banks last year increased by only 6.6 percent, to R$3.21 trillion, the lowest annual growth ever registered.

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Brazilian President Dilma Rousseff sprang to the defense of her embattled finance minister on Sunday, saying she would not be pressured into sacking him.

Rousseff, fighting to save her second term presidency from threatened impeachment proceedings, said she was ignoring suggestions by the head of her own Workers’ Party (PT) that Joaquim Levy should be dismissed.

“I think the president of the PT (Rui Falcao) can have whatever opinion he wishes, but that is not the opinion of the government,” Rousseff was quoted as saying by Brazil’s Folha newspaper during a visit to Sweden.

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Brazil’s economy may be in freefall but until recently its hard-pressed citizens could at least count on the unwavering commitment of their famously hawkish finance minister to limit the damage.

Rushed to hospital last month with what local media speculated was a pulmonary embolism, a dangerous condition involving bloodclotting in the lungs, Joaquim Levy nevertheless embarked a few hours later on a flight to New York to tout Brazil to potential investors.

So when Mr Levy announced last week he was backpedalling on one of his key promises — to quickly restore Brazil’s sinking public finances to good health — markets reacted with surprise.

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Brazil’s real fell on Friday to its weakest against the dollar in 12 years, slipping quickly in early trade to 3.334 to the dollar.

The slide in the local currency comes after Brazilian Finance Minister Joaquim Levy announced on Wednesday the government would slash its primary surplus target due to deteriorating tax revenues amid Brazil’s deepening economic slump.

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Finance Minister Joaquim Levy’s proposal to reduce Brazil’s budget savings reflects the hard reality that a contracting economy has forced the government to scale back its ambitions for fiscal retrenchment.

Levy said he is targeting a fiscal surplus that excludes interest payments equal to 0.15 percent of gross domestic product this year, a sharp reduction from his original aim of 1.1 percent. He will freeze an additional 8.6 billion reais ($2.7 billion) in spending to meet the new target.

“The objective is to reduce uncertainty in the economy by announcing the target we consider achievable, adequate, certain, given the scenario we currently face,” the minister, nicknamed Scissorhands for his propensity to cut expenditures, told reporters.

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The signs that Brazil’s economy is in trouble have been visible for a while now, but the worst could be still to come. The figures published last month for gross domestic product in the first quarter of 2015 confirmed the absence of growth that has plagued Latin America’s powerhouse for the past five years.

With GDP down by 0.2% since the new year – a fall of 1.6% compared with the same period of 2014 – Brazil has registered its worst result in six years. Even if it has actually fared better than the 0.5% drop forecast by the markets, the outlook for the world’s seventh-largest economy nevertheless looks gloomy. The figures are bad enough to reduce the already limited room for manoeuvre available to the newly appointed and ever so orthodox finance minister, Joaquim Levy. Last month he announced far-reaching austerity measures, with cuts amounting to 69.7bn reals ($22.4bn), prompting an outcry from members of his own party, who want a more flexible line.

The government led by President Dilma Rousseff is expecting a 1.2% fall in GDP, higher than the 1% forecast by the International Monetary Fund. If the first forecast is right, it would be Brazil’s worst performance in the past 25 years. “Everyone was hoping that the economy would bottom out in the first quarter,” says economist Paulo Gala, “but confidence is still deteriorating, [and] the volume of road transport is plummeting, as are car sales. The recession seems to be deepening.”

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Brazil’s federal budget needed some slicing and dicing in the financial editing rooms in the capital city last month because it was “nowhere close” to reality, Finance Minister Joaquim Levy said on Monday.

The Brazilian economy is going through a serious economic correction. With the commodity super cycle over, Brazil got hammered by keeping rates artificially low for too long in the first term of president Dilma Rousseff. At the time, the government was fighting a “currency war” against a weak U.S. dollar that led to hot money flowing into Brazil’s currency and debt markets. A stronger currency didn’t match the fundamentals of a weakening economy, cutting Brazil out of some competition in foreign markets, and leading to an increase in imports as local manufacturers could not compete with similar product makers abroad. Inflation rose. The economy slowed even more. Now there’s hell to pay. And Brazil’s FinMin is taking a battle ax to the government’s planned budget, released last month.

Levy said the latest round of budget cutbacks is due to a shortfall in revenues.